Entries (C,E, R, O) are eliminating entries. c stands for current, e stands for equity , R for revalue and O for write off

8. Potash Corporation acquired the voting stock of Safestyle Company on January 1, 2019 for $50 million. Safestyle's book value at the time was $10 million, consisting of $2 million of capital stock and $8 million of retained earnings. The $40 million difference between fair and book value was attributed to goodwill. It is now December 31, 2020, the end of the accounting year and two years after the acquisition. Safestyle's January 1, 2020 retained earnings balance is $11 million, and it reports net income of $1.8 million for 2020. Safestyle declares no dividends and has no other comprehensive income. Goodwill from the acquisition was impaired by $1 million in 2019 and $500,000 in 2020. Potash uses the complete equity method to report its investment in Safestyle on its own books. What is 2020 equity in net income of Safestyle, reported on Potash's books? A) $1,800,000 B) $ 800,000 C) $1,300,000 D) $ 300,000 50,000,000 On the December 31, 2020 consolidation working paper, eliminating entry (E) credits the Investment in Safestyle account by: A) $13,000,000 B) $11,000,000 C) $ 8,000,000 D) $ 9,300,000 On the December 31, 2020 consolidation working paper, eliminating entry (O) debits goodwill impairment loss by: A) $ 500,000 B) $38,500,000 C) $ 1,500,000 D) $39,000,000 Eliminate equity in net income and equity in other comprehensive income on the parent's books and declared dividends on the subsidiary's books Eliminate shareholders' equity accounts on the subsidiary's books against the investment account on the parent's books Adjust the subsidiary's assets and liabilities for beginning- of-year revaluations against the remainder of the investment balance Adjust reported expenses for current year revaluation write-offs Eliminating Entries C Current - E Equity Eliminate the Current year equity method entries Eliminate subsidiary's beginning-of- current-year Equity balances Recognize the beginning-of-current- year fair value Revaluations Recognize current year revaluation write-Offs Revalue - O Write-Off Calculate goodwill: $100,000,000 (10,000,000) 90,000,000 Acquisition cost Book value of Premium Cost in excess of Premium's book value Differences between fair value and book value: Current assets Plant and equipment, net Patents and copyrights Long-term debt Goodwill $ 500,000 (6,500,000) 3,000,000 (1,000,000) (4,000,000) $ 94,000,000 Consolidation Example (E) Eliminate the subsidiary's acquisition date equity balances Common stock 100,000 Additional paid-in-capital 4,000,000 Retained earnings 5,900,000 Investment in Premium Parts 10,000,000 (R) Recognize acquisition date fair value revaluations- 500,000 3,000,000 94,000,000 Current assets Patents and copyrights Goodwill Plant and equipment, net Long-term debt Investment in Premium Parts 6,500,000 1,000,000 90,000,000 Consolidation Example Eliminating entries at December 31, 2018: To eliminate equity in NI and other comprehensive income on the parent's books, dividends on the subsidiary's books, and restore the investment account to its beginning-of-year value (C) Equity in net income of Newscorp 5.250,000 Equity in other comprehensive income of Newscorp 500,000 Dividends 2,000,000 To eliminate the subsidiary's beginning-of-year equity accounts against the investment account- (E) Common stock, par 200,000 Additional paid-in capital 9,700,000 Retained earnings, January 1 5,000,000 Accumulated other comprehensive income, January 100.000 Consolidation Example Eliminating entries at December 31, 2018: To recognize the beginning-of-year revaluations and eliminate the remainder of the investment account balance (R) Plant assets, net 20,000,000 Identifiable intangibles 5,000,000 Goodwill 75,000,000 Investment in Newscorp 100,000,000 To write off plant asset and identifiable intangibles revaluations for the current year- (0) Operating expenses Plant assets, net 1,000,000 Identifiable intangibles 1.250.000 8. Potash Corporation acquired the voting stock of Safestyle Company on January 1, 2019 for $50 million. Safestyle's book value at the time was $10 million, consisting of $2 million of capital stock and $8 million of retained earnings. The $40 million difference between fair and book value was attributed to goodwill. It is now December 31, 2020, the end of the accounting year and two years after the acquisition. Safestyle's January 1, 2020 retained earnings balance is $11 million, and it reports net income of $1.8 million for 2020. Safestyle declares no dividends and has no other comprehensive income. Goodwill from the acquisition was impaired by $1 million in 2019 and $500,000 in 2020. Potash uses the complete equity method to report its investment in Safestyle on its own books. What is 2020 equity in net income of Safestyle, reported on Potash's books? A) $1,800,000 B) $ 800,000 C) $1,300,000 D) $ 300,000 50,000,000 On the December 31, 2020 consolidation working paper, eliminating entry (E) credits the Investment in Safestyle account by: A) $13,000,000 B) $11,000,000 C) $ 8,000,000 D) $ 9,300,000 On the December 31, 2020 consolidation working paper, eliminating entry (O) debits goodwill impairment loss by: A) $ 500,000 B) $38,500,000 C) $ 1,500,000 D) $39,000,000 Eliminate equity in net income and equity in other comprehensive income on the parent's books and declared dividends on the subsidiary's books Eliminate shareholders' equity accounts on the subsidiary's books against the investment account on the parent's books Adjust the subsidiary's assets and liabilities for beginning- of-year revaluations against the remainder of the investment balance Adjust reported expenses for current year revaluation write-offs Eliminating Entries C Current - E Equity Eliminate the Current year equity method entries Eliminate subsidiary's beginning-of- current-year Equity balances Recognize the beginning-of-current- year fair value Revaluations Recognize current year revaluation write-Offs Revalue - O Write-Off Calculate goodwill: $100,000,000 (10,000,000) 90,000,000 Acquisition cost Book value of Premium Cost in excess of Premium's book value Differences between fair value and book value: Current assets Plant and equipment, net Patents and copyrights Long-term debt Goodwill $ 500,000 (6,500,000) 3,000,000 (1,000,000) (4,000,000) $ 94,000,000 Consolidation Example (E) Eliminate the subsidiary's acquisition date equity balances Common stock 100,000 Additional paid-in-capital 4,000,000 Retained earnings 5,900,000 Investment in Premium Parts 10,000,000 (R) Recognize acquisition date fair value revaluations- 500,000 3,000,000 94,000,000 Current assets Patents and copyrights Goodwill Plant and equipment, net Long-term debt Investment in Premium Parts 6,500,000 1,000,000 90,000,000 Consolidation Example Eliminating entries at December 31, 2018: To eliminate equity in NI and other comprehensive income on the parent's books, dividends on the subsidiary's books, and restore the investment account to its beginning-of-year value (C) Equity in net income of Newscorp 5.250,000 Equity in other comprehensive income of Newscorp 500,000 Dividends 2,000,000 To eliminate the subsidiary's beginning-of-year equity accounts against the investment account- (E) Common stock, par 200,000 Additional paid-in capital 9,700,000 Retained earnings, January 1 5,000,000 Accumulated other comprehensive income, January 100.000 Consolidation Example Eliminating entries at December 31, 2018: To recognize the beginning-of-year revaluations and eliminate the remainder of the investment account balance (R) Plant assets, net 20,000,000 Identifiable intangibles 5,000,000 Goodwill 75,000,000 Investment in Newscorp 100,000,000 To write off plant asset and identifiable intangibles revaluations for the current year- (0) Operating expenses Plant assets, net 1,000,000 Identifiable intangibles 1.250.000